Bactolac Pharmaceutical, Inc. – ‘10-K/A’ for 9/30/01

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Amendment to Annual Report   —   Form 10-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-K/A      Amendment to Form 10-K                                11     64K 

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10-K/A
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION  
Washington, DC 20549  
FORM 10-K/A 

X   Annual Report Under Section 13 or 15(d) of The Securities Exchange Act of 
-                                                                             
1934 (Fee Required) for the Fiscal Year Ended September 30, 2001      

-   Transition Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934 (No Fee Required) for the Transition Period from ________     
to ________                                                           

Commission file number 0-26362  

ADVANCED NUTRACEUTICALS, INC. 
----------------------------- 
(Exact name of Registrant as specified in its charter)  

Texas                                   76-0642336
-----                                   ----------
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
incorporation or organization)                                            

106 South University Blvd., Unit 14                                 
    Denver, Colorado                                 80209
    ----------------                                 -----
  (Address of principal executive office)               (Zip Code)

Issuer's telephone number, including area code: (303) 722-4008  

Securities Registered Pursuant to Section 12(b) of the Act: 

                                         Name of each Exchange
Title of each Class                       on Which Registered 
-------------------                       ------------------- 

None                                      None  

Securities Registered Pursuant to Section 12(g) of the Act: 

$.01 par value common stock 
--------------------------- 

(Title of Class)  

SIGNATURES  

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant      
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.                                                                     

                                         ADVANCED NUTRACEUTICALS, INC.
                                      (Registrant)

Date: January 28, 2002                       By: /s/ John R. Brown, Jr.     
                                               -------------------------
                                         John R. Brown, Jr.,
                                              Vice President - Finance

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PART III  

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT   

Directors                                                                       
---------                                                                       

  Set forth below is biographical information regarding the members of the Board
of Directors of Advanced Nutraceuticals, Inc. ("ANI" or the "Company")          
References to the "Company" include Nutrition For Life International, Inc.      
("NFLI"). The Company sold NFLI in June 2001.                                   

F. Wayne Ballenger, age 55, has served in various financial consulting      
capacities since 2000. He served as President of First Commercial Capital from  
1995 to 2000. He has also served as President of Puncture Guard LLC since       
December 1994. From March 1992 to December 1994, he served as director of sales 
and marketing for Petrolon, Inc., a multi-level marketing organization.         
Immediately prior thereto, he served as a vice president of Southwest Bank of   
Texas with commercial lending responsibilities. Mr. Ballenger received a B.B.A. 
degree from the University of the South in 1968. Mr. Ballenger became a director
of the Company in November 1995.                                                

M. F. Florence, age 64, has served as President of Sherfam Inc. since 1989. 
Sherfam Inc. is a holding company, principally of pharmaceutical companies, and 
is the parent of Shermfin Inc., which is a principal shareholder of the Company.
From 1958 to 1989, Mr. Florence was associated with the firm of Wm. Eisenberg & 
Co., a firm of Chartered Accountants in Canada. He served as a partner of the   
firm from 1964 to 1989. Mr. Florence received a Bachelor of Commerce degree from
the University of Toronto. He is the recipient of a Chartered Accountants degree
from the Institute of Chartered Accountants of Ontario. Mr. Florence is         
President of Citadel Gold Mines, Inc. Mr. Florence is also a Director of Barr   
Laboratories, Inc., a publicly held corporation whose common shares are listed  
on the New York Stock Exchange. Mr. Florence has served as a director of the    
Company since 1994.                                                             

 Randall D. Humphreys, age 46, has served as Chairman and as Managing Director
of Enterprise Merchant Banc, L. L. C., since 1997. During 1997 he led the       
diversification effort of St. Joseph Light and Power, a New York Stock Exchange 
listed utility. During 1996 he served as a financial consultant. From 1986      
through 1995, Mr. Humphreys served as the Senior Operations officer of Brierly  
Investments Limited. In addition, Mr. Humphreys currently serves on the Board of
Directors of the following companies: Enterbank Holdings, Inc., Acousti Seal    
Corporation, Permalock Corporation, GSC Industries, and Mirror Image Holdings,  
Inc. Mr. Humphreys is a graduate of Kansas State University. Mr. Humphreys      
became a director of the Company in June 2001.                                  

  Gregory Pusey, age 49, has served as Chairman of the Board of Directors of the
Company since November 1999. Mr. Pusey served as an officer and director of     
Advanced Nutraceuticals, Inc. since December 1997. He has served as President of
Livingston Capital, Ltd. since 1987 and President and the general partner of    
Graystone Capital, Ltd. from 1987 to 1999, both venture capital firms. From June
1994 to August 1998, he served as a director and consultant to the Company.     
Since 1988, Mr. Pusey has been the President and a director of Cambridge        
Holdings, Ltd., a publicly held real estate development firm. Mr. Pusey         
graduated summa cum laude from Boston College with a B.S. degree in finance in  
1974.                                                                           

Pailla M. Reddy, age 42, is currently Chairman of the Board of Directors,   
Chief Executive Officer and President of Bactolac Pharmaceutical Inc. The       
Company acquired Bactolac in November 1999. Dr. Reddy founded Bactolac and has  
served as an officer and director of Bactolac, since 1995. From 1991 to 1995, he
was production manager for Max Pharmaceutical, Inc. From 1983 to 1991, Dr. Reddy
held various positions with Wellcome Pharmaceuticals Ltd., including research   
chemist and production manager. Dr. Reddy received a B.Sc. degree in chemistry  
from Osmania University in India, and M.Sc. and Ph.D. degrees in organic        
chemistry from Kanpur University in India.                                      

Neil S. Sirkin, age 38, is currently the Vice President of Contract Sales of
ANI Pharmaceuticals, Inc. ("ANIP"), the successor to ASHCO, a division of       
Bactolac. The Company acquired ASHCO in December 1999. Mr. Sirkin was co-founder
of ASHCO and served as an officer and director of ASHCO since 1996. He          
previously performed a variety of consulting and special project activities     
while affiliated with Sirkin Enterprises, Inc. Mr. Sirkin attended the          
University of Miami.                                                            

The Company entered into an agreement in 1995 with Shermfin Inc. wherein it 
agreed that, for so long as Shermfin Inc. owns 10% or more of the outstanding   
Common Stock of the Company, Shermfin Inc. will be entitled to designate one    
person to serve as a member of the Company's Board of Directors. Shermfin Inc.'s
designee is M. F. Florence. See Item 13.                                        

Officers                                                                        
--------                                                                        

The Board of Directors of the Company has elected the following executive   
officers. It is expected that the Board will elect officers annually following  
each Annual Meeting of Shareholders. Information is provided below regarding the
names and ages of all                                                           

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executive officers of the Company who are not directors of the Company, their   
position with the Company and the period they have served as executive officers 
of the Company.                                                                 

John R. Brown, Jr., age 64, became Vice President-Finance of the Company in 
September 1996, and had previously served the Company on a part-time basis      
commencing in December 1995. Mr. Brown also serves as Treasurer and Assistant   
Secretary of the Company. From April 1989 until he joined the Company, Mr. Brown
was a management consultant performing merger and acquisition services, systems 
analyses, financial reporting assistance, and other services for both publicly  
and privately held companies. From June, 1987 to March 1989 he was Vice         
President-Finance & Administration for Environmental Protective Industries,     
Inc., an environmental services organization. Mr. Brown is a Certified Public   
Accountant and has over 20 years experience in public accounting with both      
national and local firms. Mr. Brown received a B.S. degree in mechanical        
engineering from Stanford University and a M.B.A. degree from the University of 
Texas at Austin.                                                                

Jeffrey G. McGonegal, age 50, became Senior Vice President - Finance of the 
Company in February 2000. Mr. McGonegal also serves as Secretary of the Company 
and as President of ANIP. From 1997 to 2000, Mr. McGonegal served as Managing   
Director of McGonegal and Co., a company engaged in providing accounting and    
business consulting services. Mr. McGonegal served as a consultant to the       
Company in connection with the acquisitions made in 1999. From 1974 to 1997, Mr.
McGonegal was an accountant with BDO Seidman LLP. While at BDO Seidman LLP, Mr. 
McGonegal served as managing partner of the Denver, Colorado office. Mr.        
McGonegal is a member of the board of directors of The Rockies Venture Club,    
Inc. and Colorado Venture Centers, Inc. He received a B.A. degree in accounting 
from Florida State University.                                                  

Compliance with Section 16(a) of the Exchange Act                               
-------------------------------------------------                               

 Based solely on the Company's review of copies of Section 16(a) reports filed
by officers, directors and greater than 10% shareholders with the Securities and
Exchange Commission, which have been received by the Company and written        
representations from these persons that no other reports were required for those
persons, the Company believes that all filing requirements applicable to those  
persons were complied with for the fiscal year ended September 30, 2001.        

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ITEM 11. EXECUTIVE COMPENSATION 

  The following table sets forth certain information regarding compensation paid
by the Company and its subsidiaries to the chief executive officer and each of  
the other executive officers of the Company (the "named executive officers")    
during the fiscal years ended September 30, 1999, 2000 and 2001.                

Summary Compensation Table                                                      
--------------------------                                                      

                                                        [Enlarge/Download Table]

                                                ANNUAL COMPENSATION                       AWARDS               PAYOUTS              
                                   --------------------------------------------- ------------------------  ----------------------   
                                                                      Other        Restricted                         All Other     
        Name and Principal                                            Annual         Stock      Options/     LTIP    Compensation   
             Position                Year     Salary      Bonus    Compensation      Awards      SAR's      Payouts                 
-------------------------------------------------------------------------------- ------------------------  ----------------------   
                                                                                                                                    
Greg Pusey (3)                                                                                                                      
President, Chief Executive           1999    $      -    $     -    $         -        -              -        -       $       -    
Officer and Chairman of the          2000      94,769          -              -        -         12,500        -               -    
Board of Directors of ANI            2001      88,696     50,000                                 62,500        -               -    

David P. Bertrand (1)                                                                                                               
Former Vice Chairman of the Board    1999     318,269          -              -        -          6,250        -           6,744    
of Directors of ANI; President       2000     241,703          -              -        -         25,901        -           6,744    
Chief Executive Officer of NFLI      2001      96,769     75,000              -        -              -        -           2,810    

Jana Mitcham (1)                                                                                                                    
Former Executive Vice President      1999     298,378          -              -        -          6,250        -           5,184    
and Secretary of NFLI                2000     242,143          -              -        -         25,901        -           5,184    
                                     2001      96,846          -              -        -              -        -           2,160    

Jeffrey McGonegal (3)                                                                                                               
Senior Vice President                1999           -          -              -        -              -        -               -    
of Finance of ANI                    2000      56,558          -              -        -         25,000        -               -    
                                     2001      99,712     30,000              -        -         75,000        -               -    

John R. Brown, Jr.                                                                                                                  
Vice President Finance,              1999      96,067          -              -        -          2,500        -               -    
Assistant Secretary and              2000     109,899          -              -        -          5,500        -               -    
Treasurer of ANI                     2001     107,048          -              -        -          6,250        -               -    

David O. Rodrigue (2)                                                                                                               
Former Vice President and            1999     117,760          -              -        -          3,750        -               -    
Chief Financial Officer of           2000     120,295          -              -        -          8,750        -               -    
ANI and NFLI                         2001           -          -              -        -              -        -               -    

Pailla Reddy (3) (4)                                                                                                                
President, Chief Executive           1999           -          -              -        -              -        -               -    
Officer and Chairman of the          2000     218,750          -              -        -              -        -               -    
Board of Directors of                2001     221,795          -              -  103,000         75,000        -               -    
Bactolac                                                                                                                            

Neil Sirkin (3)                                                                                                                     
Vice President of ANIP               1999           -          -              -        -              -        -               -    
                                     2000     125,000          -              -        -              -        -               -    
                                     2001     138,470          -              -        -         30,000        -               -    

====================================================================================================================================

____________                                                                    

(1)  As a result of the completion of the sale of NFLI to Everest Group         
Holdings, Inc. Mr. Bertrand and Ms. Mitcham declined to stand for re- 
election at the Company's 2001 annual meeting.                        

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(2)  Mr. Rodrigue resigned from the Company in September 2000.                  

(3)  Messrs. Pusey, McGonegal, Reddy and Sirkin became officers during the first
quarter of the fiscal year ended September 30, 2000.                  

(4)  The Company has obtained a life insurance policy on Dr. Reddy. The benefit 
    amount of $7,000,000 constitutes "key-man" insurance and is payable to the
Company.                                                              

Employment Agreements                                                           
---------------------                                                           

In connection with the acquisition of Bactolac in 1999, the Company entered into
a two year employment agreement with Dr. Pailla Reddy, the President of         
Bactolac. In November 2001 a new two year agreement was signed. Dr. Reddy       
currently receives an annual salary of $250,000 and may receive a performance   
bonus at the Company's discretion. He is also entitled to continued use of the  
vehicle that is leased by Bactolac.                                             

In connection with the acquisition of Ash Corp. through Bactolac, Bactolac  
entered into three-year employment agreements with Neil S. Sirkin and his       
father, Allan I. Sirkin. Both individuals receive an annual salary of $150,000  
and may receive a performance bonus at the Company's discretion. During July    
2001, Allan I. Sirkin agreed to the termination of his employment agreement.    

Option Grants in Fiscal Year Ended September 30, 2001                           
-----------------------------------------------------                           

  The following table sets forth information with respect to stock option grants
to the named executive officers during the fiscal year ended September 30, 2001.

                                                        [Enlarge/Download Table]

                                                   Percent                                          Potential Realizable     
                              Number of             Total                                                 Value at           
                              Securities         options/SARs                                       Assumed Annual Rates     
                              Underlying          granted to       Exercise or                       Stock Appreciation      
                             Options/SARs         Employees         base price    Expiration           For Option Term       
                                                                                              -------------------------------
         Name                granted (#)       in fiscal year        ($/Sh)          date            5%              10%     
-----------------------  ----------------------------------------------------------------------------------------------------
                                                                                                                             
Greg Pusey                      62,500             13.3%              $1.16         4/26/11       $118,095         $188,046  

Jeffrey McGonegal               50,000             10.6%              $1.16         4/26/11         94,476          150,437  
                                25,000              5.3%              $2.25        11/16/05         47,238           75,219  
John R. Brown, Jr.               6,250              1.3%              $1.16         4/26/11         11,809           18,805  
Pailla Reddy                    75,000             15.9%              $1.16         4/26/11        141,714          225,656  
Neil Sirkin                     30,000              6.4%              $1.26         8/20/11         56,686           90,262  

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Options Exercises and Year-End Values                                           
-------------------------------------                                           

The following table shows options exercises by the named executive officers 
during the fiscal year ended September 30, 2001 and the number and value of the 
unexercised options at September 30, 2001.                                      

                                                        [Enlarge/Download Table]

                                                                                              Value of      
                                                                                           Unexercisable    
                                                                     Number of              In-the-Money    
                           Number of                            Unexercised Options          Options at     
                       Shares Underlying          Value           At Year End (#)           Year End ($)    
                            Options             Realized           Exercisable/             Exercisable/    
       Name                Exercised               ($)             Unexercisable           Unexercisable (1)
--------------------  --------------------------------------------------------------------------------------
                                                                                                            
Greg Pusey                     0                    0              4,167/70,833                  0/0        

Jeffrey McGonegal              0                    0              8,334/91,666                  0/0        

John R. Brown, Jr.             0                    0              6,001/10,749                  0/0        
Pailla Reddy                   0                    0                  0/75,000                  0/0        
Neil Sirkin                    0                    0                  0/30,000                  0/0        

__________________                                                              
(1)  Based on the price of the Common Stock of $.95 on September 28, 2001 as    
reported by The NASDAQ Stock Market.                                  

Compensation Committee Report                                                   
-----------------------------                                                   

The Compensation Committee (the "Committee") of the Board of Directors has  
been established by the Board to periodically review the compensation philosophy
for the Company's executives, and to recommend to the Board compensation        
packages for the Company's executives. The Committee also reviews and recommends
to the Board any additions to or revisions of the Company's stock option plans. 
The Committee consists exclusively of non-employee directors, appointed by      
resolution of the entire Board.                                                 

  The Committee's objective is to set executive compensation at levels which (i)
are fair and reasonable to the shareholders, (ii) link executive compensation to
long-term and short-term interest of the shareholders, and (iii) are sufficient 
to attract, motivate and retain outstanding individuals for executive positions.

 Fairness to the shareholders is balanced with the need to attract, retain and
motivate outstanding individuals by comparing the Company's executive           
compensation with the compensation of executives at other companies. The        
Committee's overall goal is to achieve strong performance by the Company and its
executives by affording the executives the opportunity to be rewarded for strong
performance. The Committee attempts to provide both short-term and long-term    
incentive pay. To accomplish its objectives, the Committee has structured the   
executive compensation program with three primary components. These primary     
components are base salary, annual incentives, and long-term incentives.        

In late 1999, the Company finalized acquisitions of three companies. In     
connection with those acquisitions, the Company entered into employment         
agreements with the officers of those companies, Gregory Pusey, Barry Loder,    
Pailla Reddy, Neil Sirkin and Allan Sirkin, to continue serving as officers.    

  As a result of the Company's worsening financial condition, in September 2000,
Mr. Bertrand, Ms. Mitcham, Mr. Pusey and Mr. Loder, as well as Jeff McGonegal,  
the Company's Senior Vice President of Finance, agreed to terminate their       
respective employment agreements or arrangements and to substantial reductions  
in their salaries.                                                              

The Committee periodically reviews executive salaries. In addition to the   
external competitive compensation market, base salary levels reflect each       
officer's performance over time and each individual's role in the Company.      
Consequently, employees with higher levels of sustained performance over time   
and/or employees assuming greater responsibilities will typically be paid       
correspondingly higher salaries. Individual performance criteria used to assess 
performance include leadership, professionalism, initiative and dependability.  
However, individual performance assessments are made qualitatively and in total,
and no specific weightings are attached to these performance indicators, nor is 
a formula utilized in determining appropriate salary increases or salary levels.

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The Committee periodically reviews the performance of executive officers to 
determine whether bonuses should be paid to those persons. The Committee has not
established specific performance measures for determining the award of bonuses. 
The Committee believes that bonuses should be provided to reward key employees  
based on Company and individual performance and to provide competitive cash     
compensation opportunities to the Company's executives. During June 2001,       
following the closing of the sale of NFLI, bonuses of $75,000, $50,000 and      
$30,000 were paid to Messrs. Bertrand, Pusey and McGonegal, respectively. In    
September 2001, a bonus of 103,000 shares of the Company's Common Stock (valued 
at $97,850) was approved for Dr. Reddy, and the shares were issued subsequent to
the fiscal year-end.                                                            

The Company's stock option plans are designed to focus executive efforts on 
long-term goals of the Company and to maximize total return to the Company's    
shareholders. The Committee believes that stock options advance the interests of
employees and shareholders by providing value to the executives through stock   
price appreciation only. Options terminate if the employee's employment with the
Company is terminated. All options awarded must have an exercise price of at    
least 100% of fair market value on the date of grant.                           

The exact number of shares actually granted to a particular participant     
reflects both the participant's performance and role in the Company, as well as 
the Company's financial success, and its future business plans. All of these    
factors are assessed subjectively and are not weighted. In determining each     
grant, the Committee also considers the number of stock options, which are      
outstanding, and the total number of options to be awarded.                     

In making grants during the fiscal year ended September 30, 2001, the       
Committee also considered the number of outstanding options previously granted  
to each officer. Due to the decline in the Company's stock price during the     
year, all of the options granted to executive officers of the Company in fiscal 
2001 were "out-of-the-money" at the fiscal year end of September 30, 2001. The  
Committee believes that its awards were consistent with the Company's           
compensation philosophy to increase the emphasis placed on long-term incentives 
and to be competitive in its total compensation program.                        

 Under Section 162(m) of the Internal Revenue Code of 1986, as amended, public
companies are precluded from receiving a tax deduction on compensation paid to  
executive officers in excess of $1,000,000, unless the compensation is excluded 
from the $1,000,000 limit as a result of being classified performance- based. At
this time, the Company's executive officers cash compensation levels do not     
exceed the payment limit and will most likely not be affected by the regulations
in the near future. Nonetheless, the Committee intends to review its executive  
pay plans over time in light of these regulations.                              

              COMPENSATION COMMITTEE

          F. Wayne Ballenger
      M. F. Florence

Compensation of Directors                                                       
-------------------------                                                       

Effective in November 2001, the Company's policy is paying Directors who are
not employees of the Company $12,000 per year. Prior to November 2001, Directors
received $18,000 per year, $400 for each Board meeting attended, and $200 for   
each committee meeting attended. Directors who are also employees of the Company
receive no additional compensation for serving as Directors. The Company        
reimburses its Directors for travel and out-of-pocket expenses in connection    
with their attendance at meetings of the Board of Directors.                    

During the fiscal year ended September 30, 2001, the Company granted options
to purchase 12,500 shares of Common Stock at a price of $1.16 per share to F.   
Wayne Ballenger, 12,500 shares of Common Stock at a price of $1.16 per share to 
M.F. Florence, and 12,500 shares of Common Stock at a price of $1.26 per share  
to Randall D. Humphreys. The option grants were made pursuant to the Company's  
1995 Stock Option Plan, as amended. Each option will expire ten years from the  
date of grant, except that an option will expire, if not exercised, 30 days     
after the optionee ceases to be a consultant to the Company.                    

Corporate Performance Graph                                                     
----------------------------                                                    

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The following graph compares the yearly cumulative return on the Company's  
Common Stock since September 30, 1996 with that of the Index for The NASDAQ     
Stock Market (U.S. Companies), Peer Group #1 (pre-NFLI sale) which includes the 
following companies: BeautiControl Cosmetics, Inc., Herbalife International,    
Inc., Nature's Sunshine Products, Inc and Reliv' International, Inc., and Peer  
Group #2 (post NFLI sale) which includes the following companies: Del           
Laboratories, Hi Tech, Natrol, Natural Alternatives, Inc., and Nutraceuticals,  
Inc.                                                                            

Total Return to Stockholders  
(Assumes $100 investment on 9/30/96)  
[GRAPH] 

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------------------------------------
              Total Return Analysis                                                                                          
                                                 09/30/1996    09/30/1997   09/30/1998   09/30/1999   09/30/2000   09/30/2001
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
       Advanced Nutraceuticals, Inc.            $    100.00   $     54.72  $     20.72  $     16.84  $      5.61  $      1.64
-----------------------------------------------------------------------------------------------------------------------------
                      Peer Group #1             $    100.00   $     97.52  $     52.79  $     72.05  $     62.27  $     81.18
-----------------------------------------------------------------------------------------------------------------------------
                      Peer Group #2             $    100.00   $    164.12  $    103.98  $     78.28  $     57.18  $     78.37
-----------------------------------------------------------------------------------------------------------------------------
               Nasdaq Composite (US)            $    100.00   $    137.38  $    138.04  $    224.52  $    300.83  $    122.76
-----------------------------------------------------------------------------------------------------------------------------
           Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Data from BRIDGE Information Systems, Inc.     

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

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 The following table sets forth, as of December 26, 2001, the ownership of the
Company's Common Stock held by: (i) each person who owns of record or who is    
known by the Company to own beneficially more than 5% of such stock, (ii) each  
of the directors of the Company, (iii) each of the current executive officers of
the Company and (iv) all of the Company's directors and executive officers as a 
group. The number of shares and the percentage of the class beneficially owned  
by the persons named in the table and by all directors and executive officers as
a group, includes, in addition to shares actually issued and outstanding,       
unissued shares which are subject to issuance upon exercise of options or       
warrants.                                                                       

                              Number of Shares           Percentage of
     Beneficial Owner            Owned                   Ownership
     ----------------            -----                   ---------

Apotex Foundation                   162,500 (1)                 6.8%  
150 Signet Dr.                                                        
Weston, Ontario, Canada                                               
9M9 1T9                                                               

Bernard Sherman                     303,848 (1)                12.7%  
150 Signet Dr.                                                        
Weston, Ontario, Canada                                               
9M9 1T9                                                               

Shermfin Inc.                       141,348 (1)                 5.9%  
150 Signet Dr.                                                        
Weston, Ontario, Canada                                               
9M9 1T9                                                               

M.F. Florence                       163,262 (1)(2)              6.9%  
150 Signet Dr.                                                        
Weston, Ontario, Canada                                               
9M9 1T9                                                               

F. Wayne Ballenger                   22,500 (3)                 0.9%  
3134 Meadway Drive                                                    
Houston, TX 77082                                                     

Gregory Pusey                       289,083 (4)                12.1%  
106 S. University, # 14                                               
Denver, CO 80209                                                      

Pailla M. Reddy                     464,100 (5)                19.5%  
25507 Williston Avenue                                                
Floral Park, NY 11001                                                 

Neil Sirkin                          60,810 (6)                 2.6%  
3600 25th Avenue                                                      
Gulfport, MS 39501                                                    

John R. Brown, Jr.                   17,550 (7)                 0.7%  
2534 Pomeran                                                          
Houston, TX 77080                                                     

Jeffrey G. McGonegal                127,363 (8)                 5.3%  
1905 West Valley Vista Drive                                          
Castle Rock, CO 80104                                                 

Randall D. Humphreys                 12,500 (9)                 0.5%  

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9150 Glenwood                                                   
Overland Park, Kansas 66212                                     

      All Officers and Directors as       1,157,168                    48.5%
a Group (8 persons)                                             

_______________________________                                                 

(1)   Mr. Sherman may be deemed a beneficial owner of the shares held by the    
Apotex Foundation due to his affiliations with the Apotex Foundation. Messrs.   
Sherman and Florence may be deemed beneficial owners of the shares held by      
Shermfin Inc. due to their affiliations with Shermfin Inc.                      

(2)   Includes options to acquire (i) 1,250 shares of Common Stock at $49.50 per
share, (ii) 1,250 shares of Common Stock at $28.00 per share, (iii) 1,250 shares
of Common Stock at $9.52 per share (iv) 1,915 shares of Common Stock at $8.50   
per share of which options to acquire 638 shares become exercisable in October  
2002, (v) 3,750 shares at $11.36 per share of which options to acquire 1,250    
shares become exercisable in December 2002, and (vi) 12,500 shares at $1.16 per 
share which become exercisable in one-third annual installments commencing in   
April 2002.                                                                     

(3)   Includes options to acquire (i) 1,250 shares of Common Stock at $49.50 per
share; (ii) 1,250 shares of Common Stock at $28.00 per share, (iii) 1,250 shares
of Common Stock at $11.00 per share and (iv) 6,250 shares of Common Stock at    
$11.36 per share of which options to acquire 2,083 shares become exercisable in 
December 2002 and (v) 12,500 shares of Common Stock at $1.16 per share which    
become exercisable in one-third annual installments commencing in April 2002.   

(4)   Includes 18,828 shares held by his wife, individually and as custodian for
their minor children, 96,313 shares held by a corporation in which he is a      
principal shareholder and warrants to purchase 3,750 shares of Common Stock at  
$15.00 per share. Includes options to acquire (i) 12,500 shares of Common Stock 
at $11.36 per share of which options to acquire 4,166 shares become exercisable 
in December 2002 and (ii) 62,500 shares of Common Stock at $1.16 per share which
become exercisable in one-third annual installments commencing in April 2002.   

(5)   Includes options to acquire 75,000 shares of common Stock at $1.16 per    
share, which become exercisable in one-third annual installments commencing in  
April 2002. Does not include any shares that may be earned pursuant to earnout  
agreements. See Item 13.                                                        

(6)   Includes options to acquire 30,000 shares of Common Stock at $1.26 per    
share, which become exercisable in one-third annual installments commencing in  
August 2002. Does not include any shares, which may be earned pursuant to       
earnout agreements. See Item 13.                                                

(7)   Includes options to acquire (i) 2,500 shares of Common Stock at $46.00 per
share and (ii) 2,500 shares of Common Stock at $11.88 per share of which options
to acquire 833 shares become exercisable in December 2001, (iii) 5,500 shares at
$11.36 per share of which options to acquire 1,833 shares become exercisable in 
each of December 2001 and 2002, and (iv) 6,250 shares at $1.16 per share which  
become exercisable in one-third annual installments commencing in April 2002.   

(8)   Includes 2,663 shares held in the name of McGonegal Family Partnership and
options to acquire (i) 25,000 shares of Common Stock at $9.00 per share of which
options to acquire 8,333 shares becomes exercisable in each of February 2002 and
2003 (ii) 25,000 shares at $2.25 per share which become exercisable in one-third
annual installments commencing in November 2001 and (iii) 50,000 shares of      
Common Stock at $1.16 per share which become exercisable in one-third annual    
installments commencing in April 2002.                                          

(9)   Includes options to acquire 12,500 shares of common Stock at $1.26 per    
share, which become exercisable in one-third annual installments commencing in  
August 2002.                                                                    

ITEM 13. CERTAIN RELATIONSHPS AND RELATED TRANSACTIONS  

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In March 1995, the Company entered into an agreement with Shermfin Corp.    
regarding conversion to Common Stock of debt owed by the Company to Shermfin    
Corp. The Company and Shermfin Corp. also agreed that, for so long as Shermfin  
Corp. owns 10% or more of the outstanding Common Stock of the Company, Shermfin 
Corp. will be entitled to designate one person to serve as a member of the      
Company's Board of Directors. Shermfin Corp. designated M.F. Florence to serve  
on the Board.                                                                   

Bactolac, headquartered in Hauppauge, New York, conducts its operations in a
facility leased from its President, Pailla M. Reddy, comprising approximately   
25,000 square feet. Bactolac's current monthly rental is approximately $26,000, 
of which $6,000 pertains to improvement made by an entity owned by Dr. Reddy,   
that escalates over the 5 year term remaining on the lease. Bactolac has two    
five-year renewal options and a purchase option on the facility.                

During July 2001, the Company negotiated a settlement of the $500,000 purchase  
notes and accrued interest payable to Allan I. Sirkin and Neil Sirkin issued in 
connection with the Company's acquisition of ASHCO. The balance then outstanding
including interest, totaled $556,191, which was settled in full with a payment  
of $435,000, resulting in a gain of $121,191. Allan I. Sirkin also agreed at    
that time to void the remainder of his employment contract and retire from the  
Company.                                                                        

In September 2001 the Company entered into an agreement to acquire certain      
assets of York Pharmaceuticals, Inc. ("York"), including equipment and customer 
list. Although the agreement has expired, the Company is continuing its efforts 
to conclude the transaction. Randall D. Humphreys, a Director of the Company,   
controls York.                                                                  

During September 2001, the Board of Directors of the Company approved a bonus of
103,000 shares of Common Stock, payable to Dr. Reddy, for his achievements. The 
shares were issued subsequent to year-end.                                      

During November 2001, an agreement was entered into with Dr. P. M. Reddy, to    
extend the second $1,000,000 principal and interest payment otherwise due on    
November 17, 2001, resulting from the November 1999, purchase of Bactolac, for  
one year. As part of the agreement, the Company agreed to a conversion option on
the deferred principal and interest to allow the holder to convert such amounts 
into shares of the Company's Common Stock at the rate of $1.00 per share, during
the extension period. The Company intends to seek shareholder approval of the   
conversion option.                                                              

During November 2001, Bactolac and Dr. Reddy entered into a new two-year        
employment agreement. In addition to a base annual salary of $250,000, and      
performance bonus features, the agreement contains customary confidentiality and
benefit provisions.                                                             

During January 2002, the Company borrowed $250,000 from Cambridge Holdings, Ltd.
The 7% note matures in one year, is convertible at the option of the holder into
shares of ANI Common Stock at $1.00 per share. The Company also issued a warrant
to allow Cambridge to acquire 50,000 shares of ANI Common Stock at $1.00 per    
share, through June 2004. Greg Pusey and Jeff McGonegal, officers of the        
Company, are also officers and directors of Cambridge. These transactions were  
approved by a disinterested majority of the Company's Board and the Board       
believes that the terms are at least as favorable as could have been obtained   
from an unaffiliated party.                                                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K/A’ Filing		Date		First		Last			Other Filings
Filed on:		1/28/02		1
		12/26/01		9
		11/17/01		11
For Period End:		9/30/01		1		7			10-K
		9/28/01		6
		9/30/00		4		5			10-K,  10-K/A,  NT 10-K
		9/30/99		4					10-K,  10-K/A,  5,  NT 10-K
		9/30/96		8					10KSB,  10KSB/A
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